Spotlight on ESG in mining

ESG in Mining: Mining, by its very nature, has an impact on the environment. Critics have also not shied away from accusing the sector – fairly or unfairly – of political corruption, neo-colonialism, and child labor. Apart from financial factors, investors have increasingly started paying attention to how sustainable and ethical a business is.

It comes as no surprise then that Environmental, Social, and Governance (ESG) has become an important framework of reference for the mining industry. ESG takes the holistic view that sustainability extends well beyond environmental issues. As a set of criteria, these standards for a company’s behavior are increasingly being used by socially-conscious investors to screen potential investments.

Indeed, a recent report by Deloitte pointed out that ESG in mining is a hot topic which is being discussed across the board. Executive roles such as Director of ESG and Environmental Managers are being added to organizations to focus on policy and procedures, environmental management systems, environmental compliance, and standards and legislation. In the last year alone, the top 10 global mining companies have hired staff for 284 newly-created ESG positions.

According to Steven Walsh, Deloitte Australia Mining & Metals Leader, the mining industry is currently undergoing one of the most transformative times in its history. Given these tectonic shifts, companies now have the unique opportunity to redefine and reorganize their businesses to create an environmentally and socially responsible future.

Evolution of ESG Activities

Accenture Africa sustainability lead Thandekile Matenga opines that it took a long time for Environmental, Social, and Governance (ESG) to transition from a type of charity to an operational need in the mining industry. “When I say charity; ESG in the old days in mining meant building boreholes and clinics for communities and providing opportunities for individuals and businesses in the vicinity of the mine to make a living. Although these are noble aims, they never addressed sustainability”.

Matenga added that mines now understand that ESG means investing in new technologies and decarbonizing operations. Indeed, as it currently stands, ESG presents a comprehensive framework for dealing with long-term, sustainability-related issues. Over the course of the last five years, major global players in the mining industry have set ambitious targets to decarbonize their processes in order to keep pace with ESG-related expectations from stakeholders and markets.

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BHP, Rio Tinto, Glencore, and Newmont have all committed to reach net-zero emissions by 2050. Other companies like Fortescue aspire to reach carbon neutrality by 2030. Fortescue is also moving forward with decarbonized locomotive fleets while BHP has installed solar panels on its sites.

According to Campbell Parry, Global resources analyst at Investec Wealth & Investment, these developments aren’t just anecdotal. Greenhouse gas emissions and energy consumption per unit of production have reduced by 30% and 24% respectively in the mining industry. Water consumption has also declined by 12% since 2010.

ESG in mining

ESG in mining is also helping companies address the needs of an evolving society. Mining operations have become much more inclusive places of work. Gender diversity changes since 2010 across the mining sector (including the percentage of women in management-level positions and in the workforce) exceed the same changes for all other sectors listed in Europe and North America by a large margin.

Led by the guidelines outlined by the International Council on Mining and Metals (ICMM) and the Responsible Mining Initiative, mining sector ESG scores are getting better and the rate of change has accelerated. Records indicate that sector-wide fatality rates have dropped 77% since 2010 while injury frequency has more than halved.

Thanks to ESG activities, there is no doubt that a cleaner and safer industry is on the horizon. Simon Gillibrand, CSG Talent’s Director of Natural Resources, aptly summarizes the situation by stating that “…we have seen a real shift from ESG being simply a PR exercise, to it becoming a genuine focus within the business.”

Energy Transition and ESG Activities

Part of the reason that ESG in mining is suddenly getting so much attention is the growing awareness that the energy transition is simply not possible without massive inputs of finite metals and minerals. Renewable energies like wind and solar power require between four and five times more metal per unit of output than conventional coal-fired power.

Similarly, an electric vehicle (EV) requires six times the mineral inputs of a combustion-engine vehicle – largely due to its batteries. These resources are neither easily accessible nor equally distributed on the planet. A “just” energy transition can only happen when mining is conducted responsibly.

According to the analyst firm Wood Mackenzie, the world needs a fivefold increase in base metal supply by 2040 to limit global temperatures within 1.5° C above pre-industrial levels. Production of aluminum, copper, zinc, high-grade nickel, and lead will need to increase immediately.

Similarly, lithium production will have to rise by 16 times by 2050, graphite by 10 times, and cobalt by 8 times to achieve global net-zero goals. To ensure that these needs are met sustainably and without the exploitation of local populations, it is important to encourage ESG activities across the board in the mining industry.

The importance of Environmental, Social, and Governance (ESG) is succinctly highlighted by Canyon Coal environmental compliance officer Arjen Nell who states, “ESG came to the forefront primarily through investors demanding increased attention on environmental, social and governance-related matters and data…This increasing focus on legal and social requirements to operate sustainably and ethically bodes very well for the future impact of ESG on the mining sector.”